Nine set to relist on the ASX

Nine Entertainment Co will rejoin the Australian Securities Exchange following a proposed $3.4 billion recap­italisation, under a plan put forward by the media company.

Nine will float as a public company “at some time in the future", and possibly within 18 months of the proposed recapitalisation, in order to give its “current secured lenders a ready opportunity to realise the value of the shares they will obtain under the scheme", the company said.

The Nine board “must use commercially reasonable efforts" to ensure a listing within the 18-month time-frame.

The biggest winners under the plan will be the senior lenders led by US-based hedge funds Oaktree Capital and Apollo Global Management. The two hedge funds own about 45 per cent of the senior debt facility.

Senior lenders stand to gain 95.5 per cent of new shares issued plus $573 million in cash, which will be shared on a pro-rata basis, according to Nine’s submission for the scheme’s first hearing in the Federal Court on Monday.

There are about 35 senior lenders who are owed $2.25 billion.

Under the Nine proposal, 200 million new shares will be issued to the company’s new shareholders, which will total about 80.

Mezzanine lenders led by investment bank Goldman Sachs will receive 3.41 per cent of shares plus $22.5 million in cash. The mezzanine lenders are owed $1.15 billion.

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The biggest loser under the plan is Nine’s present owner, private equity group CVC, which under its company Red Earth will receive only 1.09 per cent of shares plus $4.5 million in cash. CVC paid $5.6 billion for Nine between 2006 and 2008 in a deal with
James Packer
’s former media company Publishing & Broadcasting Ltd.

Under the plan, Oaktree and Apollo will each be entitled to appoint two directors to Nine’s new board, as well as a fifth director they can appoint jointly.

This will give the two hedge funds a controlling presence on the board, which is proposed to have at least eight directors and, possibly, the chief executive, who is currently
David Gyngell
.

The hedge-fund appointed directors and the CEO will together nominate three independent directors to be approved by senior lenders other than Oaktree and Apollo.

The documents reveal that Nine will take on new debt of at least $700 million to be raised by UBS.

However, a group of original bank lenders has opposed the $3.4 billion recapitalisation, arguing they never agreed to exchange their rights for equity and had no desire to become shareholders.

Nine’s warring senior lenders and mezzanine lenders agreed to convert their loans into shares in October.

Federal Court Justice Michael Jacobson has retired to make his judgment. The court has ordered that a scheme meeting be held on January 21, and that Nine chairman
Peter Bush
, or failing him, Mr Gyngell, chair the scheme meetings.

Nine’s submission states that the scheme is supported by senior lenders holding more than 75 per cent of the senior debt by value and 50 per cent by number, and by mezzanine lenders holding more than 75 per cent of the senior debt by value and 50 per cent by number.

The documents stress that Nine, which owns the free-to-air TV Nine Network, the digital joint venture Mi9, plus an events and ticketing business, is “very likely" to be placed in administration if the recapitalisation plan does not proceed.

Independent expert PBB Advisory estimates the value of Nine’s assets is less than the $3.4 billion in debt owed.

PBB’s opinion is that if the scheme is not implemented, senior lenders could potentially receive only 4.4¢ in the dollar and mezzanine lenders nothing.

The $2.25 billion in senior debt matures on February 7. If this amount is not paid by that date, the $1.15 in mezzanine debt, which otherwise matures in April 2014, will also become due on February 7.

Nine Entertainment Co’s earnings fell 14 per cent against a revenue decline of 4 per cent in 2011-12, according to a filing with the corporate regulator.